Salient to Investors:

David Stockman writes:

US stocks are in a bear market. Honest financial markets would have sold off long ago, but for central bank falsification of asset prices.

The S&P 500 is at 20 times trailing earnings as of June 2015: $97.32 per share versus $103.12 at the end of Q2, 2014, and the peak of $106 at the end of Q3, 2014, and $85 in mid-2007, when the S&P multiple was 17.6 times just before the crash. The gap between reported GAAP earnings and projected earnings – $35 per share – is the same now as then. At the end of Q2, 2008, LTM GAAP earnings had fallen to $51 per share, and by the end of Q2, 2009 to $8 per share.

The financial bubble is far bigger than in September 2008, and the global economy fundamentally much weaker.

The US faces an unprecedented global monetary deflation. Output and trade are falling nearly everywhere, including Canada, Mexico, Brazil, Australia, South Korea, Malaysia, Indonesia, Russia, Japan, the Persian Gulf oil states, and China.

Brazil is heading into depression and its worst recession in the last half century. It is leading the global monetary reversal now underway. In its boom, Brazilian wealth bought condos in south Florida, while US money managers invested hundreds of billions of dollars into Brazilian equity and bond markets. The US economy was not decoupled from Brazil during the boom and won’t decouple during the deflationary bust ahead. The flight of hot dollars from Brazil is an indication of the turmoil ahead as the massive dollar short unwinds on a global basis.


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